Tax Revenue Redistribution Among the States

July 24, 2000

Federal taxes affect everyone, but not everyone equally. Taken as a whole, people in certain states pay more in taxes (income, social insurance, corporate) than they receive back from the federal government (Social Security, Medicaid, revenue sharing, etc.). A new study by the Tax Foundation calculated how much each state's citizens pay in federal taxes, and compared to how much the federal government spent in their state.

The study found:

States that are highly industrial and business friendly are the big losers -- such as Wisconsin, which receives $0.84 from the federal government for every dollar of federal taxes paid; Illinois, $0.73; New Hampshire, $0.69; Connecticut, $0.65; and New Jersey, $0.65.

Rural states are the big winners -- such as Kentucky, which receives $1.35 for every federal tax dollar paid; Louisiana, $1.36; Alabama, $1.46; North Dakota, $1.65; Mississippi, $1.69, and New Mexico, $1.97.

The biggest beneficiary of this tax revenue redistribution is the District of Columbia, which receives $6.71 from the federal government for every dollar of federal taxes it contributes. Population also plays a factor: of the ten most populous states, only two benefited from this tax structure, while of the ten least populous states only two lost money.